THE SOCIAL BENEFIT ANALYSIS OF ISLAMIC RURAL BANKS IN SUPPORTING FINANCIAL INCLUSION IN INDONESIA: EMPERICAL EVIDENCE AND STRENGTHENING STRATEGIES

Hesi Eka, Puteri (2016) THE SOCIAL BENEFIT ANALYSIS OF ISLAMIC RURAL BANKS IN SUPPORTING FINANCIAL INCLUSION IN INDONESIA: EMPERICAL EVIDENCE AND STRENGTHENING STRATEGIES. In: Post Graduate International Seminar: Malay Archipelago Postgraduate Seminar 2016 University of Selangor Malaysia-Universitas Lancang Kuning Riau, Selangor, Malaysia.

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Abstract

The development of Islamic Rural Banks in Indonesia claimed has made a major contribution in improving the development of micro real sector in rural area. In line with Islamic banking tagline "beyond banking", the outreach of Islamic rural banks to micro real sector by channeling the productive lending, is not only for profit orientation but also social benefit oriented. This paper is concerned with the issue of the outreach - the social benefit- of Islamic Rural banks in the term of six aspects: depth, breadth, scope, worth, cost and length. This paper gives an overview about of the social benefit of Islamic Rural Banks , the contribution of Islamic Rural Bank in creating financial inclusion and prove that financial inclusion program has actually existed before the program was popularized in Indonesia. The analysis based on the secondary data which come from the Directorate of Islamic Banking of Bank Indonesia, Financial Service Authority and the Islamic Rural Banks Annual Report in period 2006-2015. This study reveals that the outreach-social benefit- of Islamic rural banks have already increased for four aspect: depth, breadth, scope and length. However, it has not seen a good performance for aspect worth and cost. The limitations of human resource capacity, the lack of monitoring and technology, customers moral hazard, side-streaming of fund, and the limitation of managerial business of customers are the causes of the emergence of financing problems. The issue of efficiency and high cost of funding contributed for the poor performance of this social benefit. We discuss the implication of this study and recommend some policies.

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